Nursery fees ‘to rise by £1,000 this year’ as childcare providers struggle with costs – forcing parents to quit work

Published

2 years ago

February 15, 2023

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The soaring cost of childcare in the UK is revealed in new figures today, suggesting nurseries will raise fees by £1,000 this year.

A survey of 1,156 providers by the Early Years Alliance found nine out of 10 expect to increase fees, typically in April, and by an average of 8% – higher than in previous years.

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UK childcare costs are already among the most expensive in the world, with full-time fees for a child under two at nursery reaching an average £269 a week last year – or just under £14,000 annually.

An 8% rise would take that to more than £15,000.

Three and four-year-olds in England attending a nursery or childminder are eligible for either 15 or 30 free hours a week depending on whether their parents work, so their costs are a lot lower.

There are different schemes in Wales and Scotland.

But the concern is that by this stage many parents – particularly mothers – have felt forced to drop out of work or cut their hours.

Tory MPs have been pressing the chancellor to take measures to make childcare more affordable in the March budget in order to reduce pressure on families, and enable more women to re-enter the workforce.

But an option to extend free hours to all two-year-olds is understood to have been ruled out.

Most nurseries and childminders surveyed – 87% – said the money they get from the government does not cover their costs to provide the “free” hours – leaving them out of pocket.

More than half of providers (51%) said they had operated at a loss last year. A handful said they were looking at fee increases of as much as 25%.

Becky Burdaky, 26, from Wythenshawe, Greater Manchester, told Sky News she had taken the “daunting” decision to leave her job in sales after having her second child, Bobby, last year.

Her daughter Harriet, aged three, goes to pre-school near their home, but the family found the costs they would face for their baby son beyond their reach.

She will stay at home and they will live on the wages of her partner Steve, an electrician.

‘Not asking other people to pay for my kids’

Becky said: “When we looked into the fees it was £70 a day – it would have been all of my wage. With Harriet it was about £54, so that’s a huge difference.

“And if he was home poorly, I wouldn’t get paid but I’d still have to pay his fee. Once we sat down and worked it out I would have been paying to go to work.

“I never envisaged myself being a stay-at-home mum, you know just cooking and cleaning and bringing up children, as I’ve always worked.

“It’s our decision to have children – I’m not asking other people to pay for my children. And I definitely don’t want people’s taxes to go up because of it.

“But I think slightly subsidising the cost of fees so it’s affordable for working parents means we can work and contribute.

“You don’t know what it’s going to be like when you return to work, you’re starting from the bottom.”

The campaign group Pregnant Then Screwed surveyed 27,000 parents last year and found nearly two thirds paid more for childcare than their rent or mortgage.

Although childcare costs have risen significantly in recent years, many providers are struggling to stay in business – with 5,400 closing their doors in the year to August 2022.

Fees for the youngest children, aged under three, are often used to keep the nurseries in business, and the rising cost of living means parents are cutting back.

What support is available?

Tax free childcare [all ages] for every £8 you pay in, the government put in £2
15 free hours for two-year-olds in England who are disabled or on certain benefits
15 free hours for all three and four-year-olds up to 38 weeks a year [10 in Wales]
30 free hours for three and four-year-olds with working parents for 38 weeks a year in England and Scotland [48 weeks in Wales]
Support for those on Universal Credit up to a maximum of £646 per child or £1108 for two

‘I’ve put my savings in to cover wages’

Delia Morris is the owner of Morris Minors pre-school in Croxley Green, Hertfordshire, where children used to start aged two but are now increasingly starting at three.

She is paid £5.41 an hour by the local authority for their free hours, but says providing it costs her around £7.

“Children come in later, when they are funded,” she said.

“That’s had a huge impact. I did raise my fees a very small amount this year but it doesn’t cover it because we only have one or two children doing a couple of sessions a week [that parents pay for].

“I’ve had to put my own savings in to cover the wages last summer, and the staff had to drop a session.”

As to what the government should do, she said: “They have to put money in. It’s difficult to say, but I have to be realistic that if I can’t make ends meet I will have to close and that’s it.”

Neil Leitch, chief executive of the Early Years Alliance, said the organisation had closed half of the 132 nurseries it operated in the last four years.

“They are exclusively in areas of deprivation, which seems to fly in the face of any levelling up agenda. These are families and children who would benefit most from support and care,” he said.

According to the OECD, the UK tops the table for the proportion of a mother’s income taken up by childcare costs – based on two children in full-time care.

‘The gender pay gap just explodes’

Christine Farquharson, education economist at the Institute for Fiscal Studies, said childcare costs for two-year-olds have risen twice as fast as inflation in the past decade – with a lasting effect on women’s pay.

“We ended up in a situation where the youngest children have the highest prices they’re ever going to pay, with the least access to government support,” she said.

“And it’s coming at this critical moment where parents are making decisions about whether or not to go back to work after they’ve been on parental leave.

“When mothers – and it is mostly mothers – make that choice to step back from the labour market it’s not just those few years. The gender pay gap just explodes and literally takes decades to come back to anything approaching the situation before they became parents.”

Proposals, championed by Liz Truss, to increase the ratio of children looked after by each adult, have attracted opposition from nurseries and parents.

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But Tory MPs are pressing the government to help parents with the cost of childcare by reducing business rates for nurseries or extending free hours to two-year-olds.

Robin Walker, chair of the education select committee, said some of the existing schemes are not working effectively – such as tax-free childcare – for which uptake is only around 40%.

Universal Credit claimants are also eligible to have up to 85% of their childcare costs funded but are put off by having to make upfront payments.

“There is money there that isn’t being used,” he said. “Upfront payment for Universal Credit and tax-free childcare are putting a lot of parents off using them at all.

“The government is already spending more than any previous government has in this space, but other countries in Europe are spending more particularly in the 0-2 age bracket.

“If we were to make the case for more investment it would unlock those opportunities for people to continue in the workplace and stimulate children in the early years.”

If they win power, Labour have promised an expansion of childcare from the end of maternity leave until the start of primary school.

Shadow education secretary Bridget Philipson told Sky News this would be a “key battleground issue” at the next election.

A Department for Education spokesperson said: “We recognise that families and early years providers across the country are facing financial pressures and we are currently looking into options to improve the cost, flexibility, and availability of childcare.

“We have spent more than £20bn over the past five years to support families with the cost of childcare and the number of places available in England has remained stable since 2015, with thousands of parents benefitting from this.”

Business

Trump trade war escalation sparks global market sell-off

Published

6 hours ago

April 3, 2025

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Trump trade war escalation sparks global market sell-off

Donald Trump’s trade war escalation has sparked a global sell-off, with US stock markets seeing the biggest declines in a hit to values estimated above $2trn.

Tech and retail shares were among those worst hit when Wall Street opened for business, following on from a flight from risk across both Asia and Europe earlier in the day.

Analysis by the investment platform AJ Bell put the value of the peak losses among major indices at $2.2trn (£1.7trn).

The tech-focused Nasdaq Composite was down 5.8%, the S&P 500 by 4.3% and the Dow Jones Industrial Average by just under 4% at the height of the declines. It left all three on course for their worst one-day losses since at least September 2022 though the sell-off later eased back slightly.

Trump latest: UK considers tariff retaliation

Analysts said the focus in the US was largely on the impact that the expanded tariff regime will have on the domestic economy but also effects on global sales given widespread anger abroad among the more than 180 nations and territories hit by reciprocal tariffs on Mr Trump‘s self-styled “liberation day”.

They are set to take effect next week, with tariffs on all car, steel and aluminium imports already in effect.

Price rises are a certainty in the world’s largest economy as the president’s additional tariffs kick in, with those charges expected to be passed on down supply chains to the end user.

The White House believes its tariffs regime will force employers to build factories and hire workers in the US to escape the charges.

Economists warn the additional costs will add upward pressure to US inflation and potentially choke demand and hiring, ricking a slide towards recession.

Apple was among the biggest losers in cash terms in Thursday’s trading as its shares fell by almost 9%, leaving it on track for its worst daily performance since the start of the COVID pandemic.

Concerns among shareholders were said to include the prospects for US price hikes when its products are shipped to the US from Asia.

Other losers included Tesla, down by almost 6% and Nvidia down by more than 6%.

Many retail stocks including those for Target and Footlocker lost more than 10% of their respective market values.

The European Union is expected to retaliate in a bid to put pressure on the US to back down.

The prospect of a tit-for-tat trade war saw the CAC 40 in France and German DAX fall by more than 3.4% and 3% respectively.

The FTSE 100, which is internationally focused, was 1.6% lower by the close – a three-month low.

Financial stocks were worst hit with Asia-focused Standard Chartered bank enduring the worst fall in percentage terms of 13%, followed closely by its larger rival HSBC.

Among the stocks seeing big declines were those for big energy as oil Brent crude costs fell back by 6% to $70 due to expectations a trade war will hurt demand.

The more domestically relevant FTSE 250 was 2.2% lower.

A weakening dollar saw the pound briefly hit a six-month high against the US currency at $1.32.

There was a rush for safe haven gold earlier in the day as a new record high was struck though it was later trading down.

Sean Sun, portfolio manager at Thornburg Investment Management, said of the state of play: “Markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade.”

He warned there was a big risk of escalation ahead through countermeasures against the US.

Sandra Ebner, senior economist at Union Investment, said: “We assume that the tariffs will not remain in place in the
announced range, but will instead be a starting point for further negotiations.

“Trump has set a maximum demand from which the level of tariffs should decrease”.

She added: “Since the measures would not affect all regions and sectors equally, there will be winners and losers as in 2018 – although the losers are more likely to be in the EU than in North America.

“To protect companies in Europe from the effects of tariffs, the EU should not respond with high counter-tariffs. In any case, their impact in the US is not likely to be significant. It would be more efficient to provide targeted support to EU companies in the form of investment and stimulus.”

Business

British businesses issue warning over ‘deeply troubling’ Trump tariffs

Published

6 hours ago

April 3, 2025

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British businesses issue warning over 'deeply troubling' Trump tariffs

British companies and business groups have expressed alarm over President Donald Trump’s 10% tariff on UK goods entering the US – but cautioned against retaliatory measures.

It comes as Business Secretary Jonathan Reynolds launched a consultation with firms on taxes the UK could implement in response to the new levies.

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A 400-page list of 8,000 US goods that could be targeted by UK tariffs has been published, including items like whiskey and jeans.

On so-called “Liberation Day”, Mr Trump announced UK goods entering the US will be subject to a 10% tax while cars will be slapped with a 25% levy.

The government’s handling of tariff negotiations with the US to date has been praised by representative and industry bodies as being “cool” and “calm” – and they urged ministers to continue that approach by not retaliating.

Business lobby group the CBI (Confederation of British Industry) said: “Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices”.

Industry body the British Retail Consortium (BRC) also cautioned: “Retaliatory tariffs should only be a last resort”.

‘Deeply troubling’

While a major category of exports, in the form of services – like finance and information technology (IT) – has been exempted from the tariffs, the impact on UK business is expected to be significant.

Mr Trump’s announcement was described as “deeply troubling for businesses” by the CBI’s chief executive Rain Newton-Smith.

The Federation of Small Businesses (FSB) also said the tariffs were “a major blow” to small and medium companies (SMEs), as 59% of small UK exporters sell to the US. It called for emergency government aid to help those affected.

“Tariffs will cause untold damage to small businesses trying to trade their way into profit while the domestic economy remains flat,” the FSB’s policy chair Tina McKenzie said. “The fallout will stifle growth” and “hurt opportunities”, she added.

Companies will need to adapt and overcome, the British Export Association said, but added: “Unfortunately adaptation will come at a cost that not all businesses will be able to bear.”

Watch dealer and component seller Darren Townend told Sky News the 10% hit would be “painful” as “people will buy less”.

“I am a fan of Trump, but this is nuts,” he said. “I expect some bad months ahead.”

Industry body Make UK said the 25% tariffs on cars, steel and aluminium would in particular be devastating for UK manufacturing.

Cars hard hit

Carmakers are among the biggest losers from the world trade order reshuffle.

Auto industry body the Society of Motor Manufacturers and Traders (SMMT) said the taxes were “deeply disappointing and potentially damaging measure”.

“These tariff costs cannot be absorbed by manufacturers”, SMMT chief executive Mike Hawes said. “UK producers may have to review output in the face of constrained demand”.

The new taxes on cars took effect on Thursday morning, while the measures impacting car parts are due to come in on 3 May.

Business

Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Published

6 hours ago

April 3, 2025

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Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Economists immediately started scratching their heads when Donald Trump raised his tariffs placard in the Rose Garden on Wednesday.

On that list he detailed the rate the US believes it is being charged by each country, along with its response: A reciprocal tariff at half that rate.

So, take China for example. Donald Trump said his team had run the numbers and the world’s second-largest economy was implementing an effective tariff of 67% on US imports. The US is responding with 34%.

Trump latest: UK considers tariff retaliation

How did he come up with that 67%? This is where things get a bit murky. The US claims it studied its trading relationship with individual countries, examining non-tariff barriers as well as tariff barriers. That includes, for example, regulations that make it difficult for US exporters.

However, the actual methodology appears to be far cruder. Instead of responding to individual countries’ trade barriers, Trump is attacking those enjoying large trade surpluses with the US.

A formula released by the US trade representative laid this bare. It took the US’s trade deficit in goods with each country and divided that by imports from that country. That figure was then divided by two.

So, in the case of China, which has a trade surplus of $295bn on total US exports of $438bn, that gives a ratio of 68%. The US divided that by two, giving a reciprocal tariff of 34%.

This is a blunt measure which targets big importers to the US, irrespective of the trade barriers they have erected. This is all part of Donald Trump’s efforts to shrink the country’s deficit – although it’s US consumers who will end up paying the price.

But what about the small number of countries where the US has a trade surplus? Shouldn’t they actually be benefiting from all of this?

That includes the UK, with whom the US has a surplus (by its own calculations) of $12bn. By its own reciprocal tariff formula, the UK should be benefitting from a “negative tariff” of 9%.

Instead, it has been hit by a 10% baseline tariff. Number 10 may be breathing a sigh of relief – the US could, after all, have gone after us for our 20% VAT rate on imports, which it takes issue with – but, by Trump’s own measure, we haven’t got off as lightly as we should have.